This study compares the effectiveness of two important, popular employment models for persons with SMI. One is called the Diversified Placement Approach (DPA), which has evolved over 30 years at Thresholds, a psychiatric rehabilitation agency in Chicago. DPA offers stepwise preparation for competitive employment, including prevocational training, agency-run businesses, group placements, and individual placements, and ultimately movement into independent employment, all available on a flexible, individualized basis without fixed time limits. The second model is a supported employment model developed in New Hampshire, known as Individual Placement and Support (IPS). Key features include: individualized planning with attention to client job preferences, close coordination between rehabilitation and treatment, and rapid job search. Over a two-year period, 180 new admissions will enter the study. Half of the sample will be African American. Participants must express an interest in competitive employment and attend 2 informational group sessions. Participants will be randomly assigned, evaluated thoroughly at baseline, and followed for 2 years. We predict that: (1) IPS clients will obtain more jobs matching their initial preferences, based on the model's primary emphasis. (2) IPS clients will obtain competitive employment more rapidly, will have longer job tenure, and have greater job satisfaction than will DPA clients. (3) Considering all forms of paid employment, DPA will achieve higher rates than IPS clients. (4) Clients who initially have less supportive social networks or who have less work experience will benefit more from DPA than IPS. (5) Clients receiving group placements will feel less isolated in their work environments. Social networks and other nonvocational outcomes also will be examined. The study will also include a cost-effectiveness component that will examine rehabilitation program and treatment costs from a societal perspective.